Dubai's markets came back down to earth this morning, but an improving economic picture gave hope that the emirate would find a soft landing as global markets plummet.
After a day spent blissfully detached from the troubles engulfing Europe yesterday, the Dubai Financial Market General index fell 0.8 per cent in the opening hours of trading before rising slightly, currently off 0.07 per cent at 1,600.36.
Leading the decline was Dubai Islamic Bank, which fell 0.47 per cent to Dh2.10 per share, though construction stocks including Emaar Properties and Arabtec saw large volumes traded.
Abu Dhabi stocks fared better, rising 0.37 per cent to 2,753.72.
Despite a sell-off among traders today, the underlying fundamentals of the UAE's economy and market liquidity were steadily improving, said Yazan Abdeen, a fund manager at ING Investment Management.
"There's selling forces coming from international flows. The inflation numbers from the US weren't encouraging," he said. "Maybe today will see negative sentiment, but it could be easily reversed."
However, eurozone debt worries would remain the main worry factor for traders, fund managers said.
"Local markets will be negatively affected today due to concerns over the situation in Greece," said Yong Wei Lee, senior fund manager at Emirates NBD.
"If the situation there is not contained, then the contagion effect will impact European economic growth and possibly also the US economy."
Asian stocks fell overnight, with the Nikkei 225 losing 1.7 per cent to 9,411.28 and the Hang Seng Index off 1.8 per cent at 21,923.22.
The losses in Asia mirror a world sell-off yesterday, which left Dubai's markets the best performing in the world, with the DFM rising 2.1 per cent and Nasdaq Dubai up 2.3 per cent. Almost every other global index plummeted.
Dubai's successful issuance of a $500 million bond buoyed Dubai government-linked companies, with Emaar Properties and Emirates NBD seeing big gains.